2017 (9) TMI 1709 - HC - Income Tax

Deduction u/a 10BA - ITAT allowed the claim - Held that - The record which was available with the A.O. is required to be taken into consideration and the tribunal while considering the matter has taken into consideration the seven documents, more particularly D.L.C. Certificate which could be procured easily and the other documents like export licence which has been granted w.e.f. 02.09.2002 and registration certificate granted by C.T.O. w.e.f. 26.08.2002. He has also produced the muster roll register. In that view of the matter, the tribunal has considered the complete facts in detail. It will not be appropriate to re-appreciate the facts, more particularly when the tribunal has observed that the discussion which has been done by the A.O. have not been specifically rebutted by the Department. - Decided in favour of assessee. Deduction u/s 40(a)(ia) towards payment made to c/f agent and work job work contractors - non deduction of tds - Held that - Since it was reimbursement, in our considered opinion, the tribunal has not committed error in allowing the appeal of the assessee. The further contention by the department if it is reimbursement, it will be open for the department to examine the matter on merits and take independent view considering law prevailing on the date on which situation arises. Unexplained investment u/s 69 - Held that - The facts of the case were rightly appreciated by the tribunal and the tribunal has not committed serious error in taking into account the stock value on the date and subsequently carried forward. - Revenue appeal dismissed

Summary

Issues Involved:
1. Deduction under Section 10BA.
2. Deduction under Section 40(a)(IA).
3. Addition under Section 69 for unexplained investment.

Issue-wise Detailed Analysis:

1. Deduction under Section 10BA:
The primary issue was whether the Tribunal was justified in allowing the deduction under Section 10BA on income of ?7,80,143/-, despite the assessee allegedly not fulfilling the prerequisite conditions prescribed under sub-section 2 of Section 10BA. The court referenced a previous decision in ITA No.113/2012 & 114/2012 (CIT Jaipur-III vs. Manoj Kumar Johari), where it was held that the Tribunal was correct in allowing the exemption under Section 10BA even if the substantive and material conditions were not fulfilled, based on the appellant's own case in A.Y. 2005-2006. The court concluded that the Tribunal's view was just and proper, and thus, the issue was answered in favor of the assessee and against the department.

2. Deduction under Section 40(a)(IA):
The second issue concerned the Tribunal's justification in allowing the deduction of ?30,92,718 under Section 40(a)(IA) towards payments made to C/F agents and work job contractors without the deduction and deposit of TDS within the prescribed time. The Tribunal found that the assessee had not directly paid transportation charges but had reimbursed an agent, M/s Sachin Cargo Movers, who had deducted and deposited the TDS. The Tribunal and CIT(A) concluded that the relationship between the assessee and the agent was that of principal and agent, and thus, the assessee was not required to deduct TDS. The Tribunal's decision was supported by various court rulings, including CIT Vs. Harbans Lal Malhotra & Sons P. Ltd. and CIT Vs. Gujarat Narmada Valley Fertilisers Co. Ltd., which established that reimbursement of expenses is not liable for deduction under Section 40(a)(IA). Therefore, the Tribunal's decision was upheld.

3. Addition under Section 69 for Unexplained Investment:
The third issue was whether the Tribunal was justified in deleting the addition of ?30,96,050/- on account of excess stock found during survey proceedings, which the CIT(A) had upheld as unexplained investment under Section 69. The Tribunal found that the stock value was correctly appreciated and carried forward, and thus, the addition under Section 69 was not warranted. The court referenced the Supreme Court decision in Commissioner of Income Tax vs. Excel Industries Ltd., which held that income must be real and not hypothetical. The Tribunal's appreciation of the facts and subsequent decision to delete the addition was deemed correct.

Conclusion:
The appeal was dismissed, with all issues ruled in favor of the assessee and against the department. The Tribunal's decisions on the deductions under Sections 10BA and 40(a)(IA), and the deletion of the addition under Section 69, were upheld as just and proper.